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Investors cheer Incitec's results

Shares in fertiliser and explosives maker Incitec Pivot have gained more than 5 per cent after it lifted its annual profit by 10 per cent and increased dividends.

However, the share price rise only just managed to offset the previous day’s sharp fall caused by the shutdown of an ammonium plant.

Incitec Pivot’s net profit in the 12 months to September 30 of $510.7 million was up from $463.2 million in the previous year. The profit growth was primarily due to one-off items, which delivered a $106 million benefit in fiscal 2012, and a $67 million cost in fiscal 2011.

Incitec Pivot also declared a 75 per cent franked final dividend of 9.1 cents per share, up from 8.2 cents at the same time last year.

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Its shares were up 15.5 cents, or 5.3 per cent, $3.065 in late morning trade. Incitec Pivot shares lost 5.2 per cent in value on Monday after the company said a temporary shutdown of a plant in Mt Isa, Queensland could cost up to $25 million.

The company’ underlying performance was hampered by a drop in earnings from its fertilisers business. Net profit excluding one-off items in the year to September of $404.7 million was down 24 per cent from the previous year’s $530.1 million.

Earnings in fertilisers fell by 40 per cent from the previous corresponding period, due to a fall in commodity prices and the strong Australian dollar, Incitec Pivot said.

It expects distribution margins in the fertilisers business to recover to average levels in the year ahead, but the plant closure in Queensland will lower ammonium production. Earnings from explosives were up eight per cent from the previous year.

Chief executive James Fazzino said 60 per cent of the company’s earnings came from its explosives business, reflecting a strategic emphasis on that sector.

Mr Fazzino said the Dyno Nobel explosives business, which grew 8 per cent in the year, accounted for 60 per cent of total earnings, while the fertiliser business, where earnings dropped 40 per cent, accounted for the balance.

He said the strong dollar had reduced earnings in its fertiliser business by $40 million in fiscal year to September.

He declined to comment on a newspaper report that Incitec was a potential bidder for the $400 million ammonia company Yara Pilbara, which is being sold by Apache.

Incitec, whose earnings in previous years have been split 50-50 between fertiliser and explosives, had expanded in explosives to tap into Australia's mining boom, but fresh plans have stalled as mining demand subsides.

In September, the company postponed until at least 2015 a decision on whether to expand its ammonium nitrate capacity in Australia, which would have supplied explosives to coal producers in the Hunter Valley.

Incitec said a feasibility study into building an ammonia plant at a brownfield site in Louisiana in the United States was ongoing, and it expected to reach a decision by end-June 2013.

The company also said its sulphuric acid plant at Mt Isa in Queensland will be shut for up to one month for repairs, which would have a financial impact in the current year of $25 million before tax.

Incitec Pivot did not give any further outlook for the current fiscal year.

Shares in Incitec Pivot have fallen 6.4 per cent this year, underperforming a decline of 1.0 per cent for main competitor Orica and a gain of 9.7 per cent for the broader market.